Georgia State Research Credit Carryforward Period Update

The state of Georgia has announced a change to the carryforward period for research credits beginning with tax periods after January 1, 2025.

This change specifically addresses the duration within which unused research credits can be applied to offset future tax liabilities.

Key Details of the Update:

New Carryforward Period (Post-2025):

• For research credits generated in tax periods beginning after January 1, 2025, the carryforward period has been revised to 5 years. Taxpayers must utilize these credits within this shorter timeframe, or they will expire.

Existing Carryforward Period (Pre-2025):

• Research credits generated prior to January 1, 2025, will retain their existing 10-year carryforward period. Taxpayers can continue to apply these credits within the originally established window.

Implications for Taxpayers

• Planning and Utilization: Businesses should carefully plan to maximize the use of their research credits within the applicable carryforward period. For credits generated after 2025, the shorter 5-year period necessitates more immediate usage.
• Segregation of Credits: Companies may need to distinguish between pre-2025 and post-2025 research credits to ensure compliance with the different carryforward rules.
• Impact on Long-Term Tax Strategies: The revised carryforward period may affect tax planning strategies, particularly for companies that rely on the flexibility of a longer timeframe to absorb these credits.

Recommendations:

• Consult with Source Advisors to review your company’s research credit utilization and ensure compliance with the updated regulations.
• Adjust financial models and tax planning strategies to account for the new 5-year limitation for credits generated post-2025.
• Maintain clear records to track the origin and application of research credits based on their respective carryforward periods.

This change reflects Georgia’s ongoing efforts to refine tax provisions while ensuring that businesses continue to innovate and benefit from research incentives. By understanding and adapting to these updates, companies can better position themselves to leverage the benefits of research credits within the revised framework.